Posts in Forum Selection Provisions

Chancery Finds Buzzfeed and Others Not Bound by Arbitration Provisions in Employment Agreements

Buzzfeed v. Anderson, C.A. No. 2022-0357-MTZ (Del. Ch. Oct. 28, 2022)
In 2021, Buzzfeed engaged in a SPAC transaction wherein its stock was converted into stock in Buzzfeed’s post-SPAC corporate form. An IPO followed. In connection with the IPO, former employees of the pre-transaction Buzzfeed (“Old Buzzfeed”) who had received shares in the post-transaction Buzzfeed (“New Buzzfeed”), filed mass arbitrations against New Buzzfeed, certain officers and directors, and the IPO transfer agent. These former employees and New Buzzfeed shareholders alleged that, because a different class of stock was offered in the IPO than the class of stock that they held, they were unable to participate in the IPO, suffering $9 million in damages. In response, New Buzzfeed, certain officers and directors, and the IPO transfer agent sued in the Court of Chancery seeking: (1) to enjoin the arbitrations, (2) a declaration that they were not bound by arbitration provisions in employment agreements entered into with Old Buzzfeed, and (3) a declaration that the former employees were obligated to comply with a forum selection clause in New Buzzfeed’s charter and bring their claims in the Court of Chancery. The plaintiffs moved for summary judgment on their claims; the former employees moved to dismiss the complaint for lack of subject matter and personal jurisdiction. More ›

Chancery Holds That Controlling Stockholder Approving Exclusive Forum Selection Clause In Charter Amendment Impliedly Consented To Personal Jurisdiction

In Re Carvana Co. S’holders Litig., C.A. No. 2020-0415-KSJM (Del. Ch. Aug. 31, 2022)
In Delaware, parties may waive the requirement of personal jurisdiction either expressly or impliedly. The Court of Chancery applied this waiver principle in In re Pilgrim’s Corporations Derivative Litigation (2019), finding that a controlling stockholder impliedly consented to personal jurisdiction when his Board appointees approved a bylaw selecting the Court of Chancery as the exclusive jurisdiction for certain stockholder disputes. This decision extends and applies Pilgrim’s ruling to a controlling stockholder who personally voted to approve a charter amendment that granted exclusive jurisdiction in the Court of Chancery. More ›

Chancery Sustains Claims for Controlling Stockholders’ Breach of Fiduciary Duties, But Dismisses Claim to Void Transaction under DGCL Section 205

Amgine Techs. (US), Inc. v. Miller, C.A. No. 2020-0537-JRS (Del. Ch. Nov. 29, 2021)
This case involves the Court of Chancery’s consideration of various Rule 12 arguments for dismissal advanced by defendants – alleged controlling stockholders who assigned certain of the corporation’s intellectual property to another entity they owned, and who allegedly caused the corporation to enter into a stockholders’ agreement that gave them preferential terms. More ›

Chancery Grants Anti-Suit Injunction, Holds Non-Signatory Subsidiary is Bound by Stock Purchase Agreement’s Forum Selection Clause

Fla. Chem. Co., LLC v. Flotek Indus., Inc., C.A. No. 2021-0288-JTL (Del. Ch. Aug. 17, 2021).
Under Delaware law, a forum selection clause may be enforceable against a non-signatory if the non-signatory has a significantly close relationship to the agreement, either as an intended third-party beneficiary or under a theory of estoppel, and the claim subject to the forum selection provision arises from the non-signatory’s standing relating to the agreement. In regard to the last element, some Delaware cases have suggested what the court here called a “same agreement rule” – requiring that claims against the non-signatory arise from the same agreement that contains the forum selection provision. This case rejects the “same agreement” rule and holds a non-signatory may be bound even though its claims were not brought under the agreement containing the forum selection clause, provided that they are otherwise within the clause’s reach. More ›

Chancery Declines to Enforce Forum Selection Provision Actively Hidden From Defendant During Transaction

UBEO Holdings, LLC et al. v. Drakulic, C.A. No. 2020-0669-KSJM (Del. Ch. Apr. 30, 2021)
Generally, Delaware courts will enforce the terms an executed agreement, even against a party claiming not to have read the terms before signing. This rule applies with full force to forum selection provisions in which a contracting party consents to jurisdiction in a particular forum. As this case shows, however, rare exceptions exist. More ›

Chancery Enjoins Prosecution of Fraudulent Inducement and Declaratory Judgment Claims Based on Exclusive Delaware Forum Provision

SPay, Inc. v. Stack Media Inc. k/n/a JLC2011, Inc., et al., CA No. 2020-0540-JRS (Del. Ch. Mar. 23, 2021)
To obtain a preliminary anti-suit injunction, a movant must show (1) a reasonable likelihood of success on the merits, (2) irreparable harm absent an injunction, and (3) the balance of hardships tips in its favor. Although the Court of Chancery does not grant anti-suit injunctions lightly, it will do so when a party to a valid and absolutely clear forum selection clause attempts to litigate covered claims outside of the parties’ chosen forum. More ›

Chancery Dismisses Action Involving Unusual Issue of Personal Jurisdiction

Sustainability Partners LLC, v. Jacobs, C.A. No. 2019-0742-SG (Del. Ch. June 11, 2020)

In this action involving “an unusual issue of personal jurisdiction,” plaintiff Sustainability Partners LLC (“SP” or the “Company”) sought a declaratory judgment that defendant, a former SP employee (the “Defendant” or “Jacobs”), had no rights under a purported oral agreement between the Defendant and the Company. Despite the fact that Jacobs was not a signatory, the Company claimed that there was personal jurisdiction over Jacobs pursuant to the forum selection clause in the Company’s Operating Agreement based on a theory of equitable estoppel. The Court of Chancery disagreed and dismissed the action for lack of personal jurisdiction pursuant to Chancery Court Rule 12(b)(2).  More ›

Chancery Finds Employment Agreement’s Forum Selection Clause Did Not Reach Fiduciary Duty Claims, But Stays Case Pending Resolution of First-Filed Texas Action

EnVen Energy Corp. v. Dunwoody, C.A. No. 2019-0579-KSJM (Del. Ch. May 28, 2020)

This case illustrates Delaware’s approach in interpreting contractual forum selection provisions and in considering whether to stay a later-filed action under the well-known McWane doctrine. More ›

Chancery Denies Preliminary Injunction Based Upon Overbroad Restrictive Covenants

FP UC Holdings, LLC v. Hamilton, C.A. No. 2019-1029-JRS (Del. Ch. Mar. 27, 2020).

A party seeking a preliminary injunction must demonstrate a likelihood of success at trial. In a breach of non-compete action, this burden may not be met when economically unjustified restrictive provisions are “too broad as they would essentially prevent Defendant from operating … anywhere in the United States.” More ›

Delaware Supreme Court Explains That Litigants Seeking Application of Foreign Law Have Burden To Establish its Substance

Germaninvestments AG v. Allomet Corp., No. 291, 2019 (Del. Jan. 27, 2020). 

In reversing the Court of Chancery’s decision that Austrian law applied to the interpretation of whether a forum selection clause was permissive or mandatory, the Delaware Supreme Court ruled that, to the extent prior decisions were unclear on the issue, a party seeking the application of foreign law in a Delaware court has the burden not only of raising the issue of the applicability of foreign law under court rules, but also, of establishing the substance of the foreign law to be applied.    More ›

Chancery Rejects Challenge to Delaware as Proper Venue in Books and Records Action

Stanco v. Rallye Motors Holding, LLC, C.A. No. 2019-0751-SG (Del. Ch. Dec. 23, 2019). 

Delaware courts generally respect contractual forum selection provisions. When it comes to Delaware LLCs, however, the Delaware statute expressly precludes a non-managing member from waiving its right to a Delaware forum for proceedings involving the LLC’s internal affairs.  6 Del. C. § 18-109(d). And, in general, any waiver of rights must encompass knowledge of the right and clearly expressed intent to relinquish it. This case discusses the interplay between these rules. More ›

Chancery Enforces Delaware Forum Selection Clause and Examines the Limited Circumstances Where a Foreign Nation May Divest Delaware Courts of Jurisdiction

AlixPartners, LLP v. Mori, C.A. No. 2019-0392- KSJM (Del. Ch. Nov. 26, 2019).

In AlixPartners, the Court of Chancery confirmed its jurisdiction to adjudicate disputes relating to the internal affairs of a Delaware limited liability partnership and explained the limited circumstances in which foreign law may divest the Court of subject matter jurisdiction. The suit arose when an employer, the global business advisory firm AlixPartners, which operated as a limited liability partnership, sued an employee, who also held partnership interests, for breaches of the relevant LLP Agreement, Equity Agreement, and Employment Agreement. Pursuant to the LLP and Equity Agreements, the employee had received equity in two partnerships formed under Delaware law by AlixPartners. More ›

Court of Chancery Clarifies a Plaintiff’s Ability to Bind a Non-Signatory to a Forum Selection Provision

Neurvana Medical, LLC v. Balt USA, LLC, C.A. No. 2019-0034-KSJM (Del. Ch. Sep. 18, 2019), reargument denied (Oct. 10, 2019).

In Neurvana Medical, LLC v. Balt USA, LLC, the Court of Chancery declined to exercise personal jurisdiction over a French company, Balt International, S.A.S., the parent of Balt USA, LLC.  The Court rejected Neurvana’s argument that Balt International was so “closely related” to the asset purchase agreement at issue that the agreement’s forum selection clause bound Balt International, even though Balt International was a non-signatory.  The Court also declined to assert jurisdiction over Balt International based on the assertion that Balt USA was Balt International’s agent.  Thus, the Court granted Balt International’s motion to dismiss. More ›

Chancery Awards $3 Million in Attorneys’ Fees Following Invalidation of Charters’ Forum-Selection Provisions for Securities Act Claims

Sciabacucchi v. Salzberg, C.A. No. 2017-0931-JTL (Del. Ch. Jul. 8, 2019).

In December 2018, the Court of Chancery held that forum-selection provisions in three corporate charters were ineffective.  The provisions had required any claim under the Securities Act of 1933 to be filed in federal court (“Federal Forum Provisions”).  The Court held them to be invalid, because federal securities claims were not “internal affairs” claims for which a Delaware corporation’s charter may choose a forum.  Seven months later, the Court granted an application for an all-in award of attorneys’ fees and expenses in the amount of $3 million under the corporate benefit doctrine.  Defendants had argued that the award should not exceed $364,723 plus expenses.  Reasoning that “the plaintiff achieved a significant and substantive result by successfully invalidating the Federal Forum Provisions,” the Court turned to Delaware precedent to determine an appropriate fee for this kind of non-monetary relief. More ›

Chancery Enforces LLC Agreement’s California Forum Selection Clause For Advancement Claim

Li v. LoanDepot.com, LLC, C.A. No. 2019-0026-JTL (Del. Ch. Apr. 24, 2019).

Delaware law permits parties conducting their business as limited liability companies to include mandatory arbitration or forum selection clauses in their LLC agreements, even those naming a forum outside of Delaware.  And the State’s public policy supports enforcing contracts, including forum selection clauses, unless specifically prohibited by statute or upon a showing of fraud or overreaching.  There is an important statutory exception in this context.  Under Delaware’s LLC statute, 6 Del. C. § 18-109(d), other than for arbitration, a non-managing member of an LLC cannot waive its right to sue in the Delaware courts for matters relating to the LLC’s “organization or internal affairs.” More ›